Sales tax deduction embraced

Local business leaders are claiming to see results of recently enacted legislation that gives Washingtonians a sales tax deduction on federal income tax filings.

On Saturday, U.S. Sen. Maria Cantwell, a sponsor of the bipartisan tax legislation, visited Valley Honda and talked with a handful of businesspeople about the value of the tax break.

“For many families this will provide them with some extra income to help make our economy grow,” said Diana Wilhite, business owner and Spokane Valley mayor.

Chris Marr, owner of Foothills Auto Group, which includes Valley Honda, said salespeople on his lots saw a notable increase in December auto purchases and told managers that the deciding factor for some buyers was the deduction for big-ticket purchases.

Washington is one of seven states nationwide that rely on sales taxes rather than a state income tax. In 1986, lawmakers repealed sales tax deductions. Congress re-established the deduction for the 2004 and 2005 tax years.

The senator hopes to gather positive economic impact stories to present to her congressional colleagues in hopes of extending the tax break into the next decade.

“We need to fight to make this permanent,” Cantwell said, suggesting that every dollar in deductions could result in $1.50 in economic stimulus.

People who haven’t collected sales receipts for 2004 – or don’t want the hassle of saving them for 2005 – can claim a standard deduction, based on household income and number of family members.

For example, a family of four earning between $40,000 and $50,000 can deduct $808 from their taxable income.

Big-ticket items, such as boats and cars, can be added to the tabled amount to further lower taxes. Cantwell said the goal is to put discretionary income back into the pockets of Washingtonians, who in turn will beef up the economy and potentially compensate for the tax break by increasing other tax revenue sources.

Bill Simer, an accountant who serves as treasurer for Spokane Regional Chamber of Commerce, said his clients are eligible for refunds that are $300 to $500 higher because of the deduction. “If you’re building a new home this deduction is huge.”